PITI is the complete monthly mortgage payment: Principal (paying down the balance), Interest (the cost of the loan), Taxes (property taxes, usually escrowed monthly), and Insurance (homeowner's or landlord policy premiums, also commonly escrowed). Comparing properties or loans on principal-and-interest alone understates the true carrying cost — in high-tax areas, the T and I can rival the P and I. When a flipper or landlord says 'the payment,' the honest number is PITI.
The formula / structurePITI = Monthly Principal + Interest + (Annual Taxes ÷ 12) + (Annual Insurance ÷ 12)
PITI: a worked example
Worked example. A loan payment of $780 principal & interest, property taxes of $3,600/yr ($300/mo), and insurance of $1,560/yr ($130/mo) → PITI = $780 + $300 + $130 = $1,210/mo. An analysis that budgeted only the $780 understated carrying cost by $430 every month.
What affects PITI
- Property tax rate and assessed value (varies enormously by state and county)
- Insurance market and property condition
- Loan balance, rate, and amortization
- Escrow requirements of the lender
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